Rental property buyout after a divorce

Forum|Forum|2 years ago
January 27, 2024
1 reply
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My spouse and I divorced in April 2021. I bought his half of our home (it is a duplex). I live in one side, rent the other. Can I update the purchase price to reflect what I paid him? If so, how? Can I then reset the depreciation to 27.5 years? Again, if so, how?

This will entail filing an amended return for 2021 and 2022.

Carl11_2

Employee

YOu don't "update" anything. You have an outright purchase/acquisition to report. I assume you closed on the purchase in 2023?
You need to provide more details too, as I'm not clear why you would need to amend a prior year return because of a purchase/acquisition you made in 2023.
Also need details of how things were "before" the separation/divorce/buyout. Was only one unit rented out? If so, when was the property originally acquired or first placed into service? Maybe both units were rented out and you lived elsewhere? Maybe neither unit was a rental until some point during or after the separation/divorce?
Lots of variables here. So need details, mainly on the historic use of the property, along with how it was reported in the past.
What was the last tax year a joint return was filed, on which this property or any portion of it was reported on SCH E?

Rick19744

Employee

There are too many questions to be able to provide some guidance:

The state of residency may have an impact
We don't have privy to the divorce agreement
While you may indicate that "you purchased 1/2 of the property", however a key here is whether this transaction was incident to a divorce.
I'm going to recommend you meet with a tax professional and take along your divorce agreement

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.